Setting up prices can be a daunting task for your store. You need to take into account plenty of factors as product cost, advertising, cost of operations, transport, packaging, promotions + freebies, and so on. Here are some out of the box examples of smart pricing you could try in your e-store.
Loss leader pricing – lowest price on the market method
It is one of the methods often practiced by large retailers, including on Black Friday or Cyber Monday. It is a fantastic way of getting visits to your store and significantly increase conversion rates.
The idea behind this pricing strategy is simple – keep certain items significantly lower than what you can find on competitor stores. Create an ad exclusively targeted on these items and watch the traffic on your store. There are four main benefits of this method:
a) Drives traffic to your store;
b) Converts “window shoppers” into shoppers;
c) They will more often than not buy other products as well – accessories, for example;
d) Build loyalty.
Real-time price optimization
Using real-time retail insights to determine the price at which your products are sold is the ideal way of ensuring profitability. Being lower than the competition at all times, however, is not an advisable strategy. Instead, you can use out-of-stock situations identified in real-time by a retail analytics product like Incompetitor to pump up prices. Out-of-stock situations are opportune moments for raising prices as customers looking for these out-of-stock products on competing sites will surely navigate to you.
THREE different prices, visible, for the same product
An example is Everlane, a Shopify store that, for some products, has THREE different prices. So you could buy it at its cheapest or support the company by spending a little more. Why does this help? Often times customers will buy the item priced in the middle. People don’t usually want the cheapest product but they also avoid buying the most expensive one. So they’ll opt for the mid-priced item. Having the price difference helps them make a decision even though the products are similar.
Set a VERY specific price
By very specific we don’t mean the psychological $19.99 or $14.99, but instead, you could go for $14.72 or $19.37.
According to a University of Florida study, consumers think that stores make rounded prices artificially higher. Hence, they are less likely to tap that call-to-action (CTA) button. You may have just chosen a random price; too high for what the product is actually worth.
Specific prices work particularly well in categories such as tech. People will believe that the price was reached by calculating each component’s cost and they will be more likely to buy. It may also work on hand made products where you require to combine certain ingredients. Most of the customers will not think it’s a made-up number.
Chose price with few syllables
Tap into the customer’s psychology! Research from Clark University found that even if two prices are the same length, e.g. $27.84 (twenty-seven-eighty-four) and $28.15 (twenty-eight-fifteen), the longer the price phonetically, the higher it seems. Which would be $27.84 in this example, despite it being the lower price. It’s strange but true.
For this reason, you may want to experiment with round values for your online store. If you went through all of your prices, counting every single syllable, well, it would drive you mad. A simple way to reduce the syllable count for emotion-based purchases would be to just round off the values.
Fast shipping, different pricing
The largest companies are taking full advantage of this strategy. Amazon, for example, offers very fast shipping for a premium pricing. Customers are given quick delivery options such as same day, next day or 2-day shipping, in return for an additional premium. So while Amazon can keep its prices lower than most of its competitors, it uses the quick delivery pricing model to drive profitability.
Technicals don’t like “50” or “00”
Technical geeks don’t like 00 and 50. Someone that loves technical specification will find a price like $639.96 much better adjusted to the product than $600 or $650. Don’t give specialists rounded prices. Amazon’s sellers know this well.
Size matters in prices, as well. Do NOT emphasize the price of the product unless it’s a VERY good deal or a very good promotion. Do not attract the customer’s attention to the pricing, by making it big. Keep it in small fonts as they convert better than the bigger ones.
Use visual contrast on discounts
This comes already implemented with some of Shopify’s Themes, but if not, you should do it! Using a visual contrast between sales prices and original prices, via color or size, for example, magnifies the difference. Check HappySocks.com color scheme below – old price got cut, a red discounted one next to it, and then a TWO color balloon that tells you the percentage of the discount. This is a great way to attract the attention of the customer for the REAL deals.
People just LOVE free shipping. So instead of pricing $15 + $5 shipping, people would rather pay $20 + FREE shipping. The customer feels like they scored a deal because they save money on shipping.
If you do decide to charge for shipping, be mindful of the language. Instead of the usual “$5 shipping” try going for a “small $5 flat rate”.
Oberlo profit margin calculator is a tool that helps you calculate the margins your store has. You can also determine your profit. The tool allows you to input either your Cost, Margin, Revenue or Profit. You need to fill in at least two of them to find the answer to one of the options.
Check out Neil Patel’s advice on how to set up your prices.